Honda has warned profits will be sharply lower in the full year than it
previously expected after sales in China were hit by an anti-Japan backlash
and weak demand in Europe.

The Japanese car maker said it now estimated net profits would be 375bn yen (£2.9bn) in the year ending March 31 2013, and not 470bn yen as predicted earlier.

Sales of Honda vehicles in China have fallen in the wake of its row with Japan over disputed islands, which led to anti-Japan demonstrations in the world’s second largest economy and saw Chinese consumers boycott Japanese goods.

In a statement Honda said that as well as problems in China and falling sales in Europe as a result of the eurozone crisis, “unfavourable currency effects due to depreciation of local currencies in some emerging countries” were also partly responsible for the weaker full-year outlook.

Protests in China followed a dispute over ownership over islands in the East China Sea.

Analysts said that other Japanese car makers could be affected in a similar way to Honda and may forced to lower earnings expectations.

“It is likely Toyota and Nissan are going to cut forecasts in the same way. A cut was to be expected because the problems with China weren’t factored into forecasts,” said Fujio Ando, managing director at Chibagin Asset Management.

Despite the full-year warning Honda said net profits in the first half rose 132pc to 213.9bn yen as the company continued to recover steadily from the impact of last year’s Japan earthquake and Thai floods.

Honda said demand was driven by the US, Japan, new car models, and demand for motorcycles, particularly in India.